The bear has bare its fangs on our local stock market. Following the plunge in US equities on Wednesday overnight, local benchmark Straits Times Index (STI) plunged as much as 3 percent to 3,035.2 on Thursday, 11 October 2018. The STI managed to regain some ground to close 2.7 percent in the red at 3,047.
It is almost unquestionable that Singapore boasted one of the most successful economic stories in the last half century. Through our rapid development, our economy has transformed from a fishing hub to one that is now heavily service-oriented. As Singaporeans rose to achieve one of the highest purchasing powers in the world, Singapore naturally became an ideal destination for retailers to set up shops here.
Since late last year, international tourists have been returning to our tiny red dot and arrivals are continuing to grow. According to Singapore Tourism Board, Singapore attracted 9.2 million visitors to our shores in 1H18, up 7.6 percent from a year ago. The hotel sector benefitted from the return of tourists, with hotel room revenue rising nine percent to hit almost $2 billion. Revenue per available room (RevPAR) also recorded almost four percent rise to $187 as a result of higher average room and occupancy rate.
Retail investors often lament that setting up a diversified portfolio with a limited capital base often compromises returns. Indeed, the capital requirement for a diversified portfolio to generate meaningful returns can be substantial and particularly challenging for young investors and retirees who have minimal savings to invest.
Fervent value investors ascribing to Benjamin Graham’s investment philosophy may sometimes find opportunities in stocks stigmatised by the market. Such stocks of companies often trade down to bargain levels due to their involvement in accounting irregularities, financial distress or protracted litigation. An example of such stocks in our local context, Vibrant Group recently plunged almost 50 percent from $0.33 to $0.17 after discovering possible accounting fraud in its BlackGold International subsidiary just a year after acquiring the company.
One of our favourite small-cap developers, Pacific Star Development (PSD) reported its 18M17 earnings today which showed that the group has indeed delivered on all fronts. For the 18-month period, PSD delivered revenue of $121.4 million compared to $59.1 million in FY16. Net profit attributable to shareholders rose 12 percent to $8.4 million, after accounting for dilution from non-controlling interest.
Over the past two weeks, the Turkish Lira-plunge casted limelight on other emerging markets. Emerging Market countries have relatively weak currencies and depend heavily on external financing. The flood of cash - engineered by the concerted effort of global central banks during the subprime crisis - has fuelled heady growth in the past decade for the global economy but is now leaving emerging markets riddled with debt. If that is not enough to warrant some concern, US and China trade war is threatening world growth significantly while the US Federal Reserve continues to hike interest rates and raise borrowing costs. When compounded, Emerging Markets are left exposed and vulnerable to the vultures circling the sky.
After the Hari Raya Haji holiday, the local stock market opened on a high note, jumping 1.5 percent on 23 August 2018. Ever since peaking at 3,641 in May, the STI has been entrenched in correction phase. On 21 August 2018, just before the holiday, the STI closed at 3,198, just below the 3,200 psychological-support level.
As trade tensions between the US and China intensify, investors are increasingly fearful of a full-scale trade war. Currently, the Shanghai Securities Exchange Composite index has fallen to 2,723 points; a level when oil prices tanked in 2016. The downfall of Chinese equities reflected increasing expectation of an impending softening of the Chinese economy.
Shares Investment did a feature of LY Corporation in conjunction with its IPO at the start of 2018. The wooden bedroom furniture manufacturer recently reported its 1H18 results.